RETAIL MANAGEMENT

UNIT 1: Retail Formats ;

Store Retailing
A) Retail sales by ownership:
The term ‘retail sales by ownership’ refers to the basic system or basic
format of doing business.
The retail sale by ownership is classified as under:
(1) Independent Retailer: A retailer is a person who buys a particular shop to
perform various retailing activities. An independent retailer is someone who
handles that shop and all its operating activities independently. They are more
nimble, Independent retailers create community, They cater to clients.
However they have Low Bargaining Power, Harder to Attract & Retain
Talents, It Takes Time & Effort.
(2) Chain stores: Chain stores are defined as a type of retail
organisation that is composed of more than one retail store, and it
is owned and operated by a single management company. It is an
outlet that is characterised by several locations that share a brand
with centralised management along with standard business
practices.
Multiple stores provide various advantages to their customers, which are described
below :
1. Economies of scale: Since central procurement has been used, the multiple-shop
organisation benefits from economies of scale.
2. Elimination of Middlemen: The multiple-shop organisation can eliminate unnecessary
middlemen in the sale of goods and services by selling directly to consumers.
3. No Bad Debts: Even though all sales in these shops are made in cash, there are no
losses due to bad debts.
4. Transfer of Goods: Goods that are not in demand in one location may be transferred to
another location where they are in demand. This reduces the possibility of dead stock in
these stores.
5. Diffusion of Risk: Losses in one shop may be offset by profits in other shops, lowering
an organization’s overall risk.
6. Low Cost: Due to centralised purchasing, elimination of middlemen, centralised sales
promotion, and increased sales, multiple shops have lower business costs.
7. Flexibility: Under this system, if a shop is not profitable, the management may decide
to close it or relocate it without affecting the overall profitability of the organisation.
Disadvantages:
1. Limited Selection of Goods
2. Lack of Initiative
3. Lack of Personal Touch
4. Difficult to Change Demand
5. No Credit Facility
6. Huge Capital Requirements
Chain store
(3) Franchising: Franchising is an arrangement where franchisor
(one party) grants or licenses some rights and authorities to
franchisee (another party).
A contractual agreement takes place between Franchisor and
Franchisee. Franchisor authorizes franchisee to sell their
products, goods, services and give rights to use their trademark
and brand name. And these franchisee acts like a dealer.
Pros
• Franchisors get to expand their business without investing a lot of
money since the franchisee handles all the selling. It also helps build
their brand names and reputation in the market.
• Franchisee gets to start its business on an already established brand
name, which reduces the risk of failure and increases profit margins.
• Also, franchisees do not need to spend extra money on training or
products since the franchisor can provide them. On top of that, they
learn the trade secrets and business techniques at the top levels.
Cons
• If the franchisors do not maintain the products' quality, the
franchisee can suffer heavy losses since they depend entirely
on them for goods.
• The franchisor's secrets are also at risk since there is always
a chance that the franchisee will risk their trade secrets to
the competitor.
• For franchisees, they do not have complete control over their
business and must act according to the policies or terms.
Franchise examples
(4) Leased department stores: Leased department means an
arrangement whereby a retailer licenses or otherwise permits an
independent seller to conduct business from the retailer's
premises.
(5) Vertical Marketing system: A vertical marketing system is the type of cooperation
between the members of a distribution channel. It includes a producer, a wholesaler, and a
retailer collaborating to deliver necessary products to their customers and aims at achieving
better efficiency and economies of scale.
• Advantages:
• More resources
• Efficiency
• Better communications.
• Branding and sales
• Disadvantages:
• Limited perspective
• Reduced quality control
• Disjointed coordination
(6) Consumer co-operatives:
A consumers' co-operative is an enterprise owned by consumers and managed
democratically and that aims at fulfilling the needs and aspirations of its
members. The main motive of Consumer Cooperative Stores is to provide
supreme quality goods and services to consumers at reasonable prices and protect
themselves from the exploitation of middlemen. This objective is attained by
eliminating the role of middlemen or retailers who add up their profit to the price
of the final goods and services and sell them to the consumers. To eliminate the
middlemen, the members of the Consumer Cooperative Stores buy goods in bulk
directly from the wholesalers and sell them to consumers at prices lower than in a
retail market. For starting a Consumer Cooperative Store, there should be at least
10 members who voluntarily form an association and get it registered under the
Cooperatives Societies Act. The members of the Store raise capital by issue of
shares among themselves.
Advantages of Consumer Cooperative Stores
• Limited Liability
• Prevents Exploitation:
• Quality Products
• Regular Supply
• Supply as per Choice
• Convenient Location
• Legal Support
• Democratic Management
Disadvantages of Consumer Cooperative Stores
• Lack of Funds
• Lack of Skill
• Lack of Confidentiality
• Lack of Coordination
• Lack of Awareness and Publicity
• Lack of Initiative
On the basis of merchandised offered:
B) Based on merchandise offered
i. Convenience stores:
ii. Supermarkets
iii. Hypermarkets
iv. Specialty stores:
v. Departmental stores
vi. Catalogue showrooms
Non- store Based retail Industry Mix:
Non Store retailing:
• When the goods and services are sold without a physical place or
store, it is called non-store retailing. Non-store retailing adopts a
direct relationship with the consumer. The classification of non-store
retailing is direct personal contact and direct response marketing.
Direct personal contact
• Direct selling is making a face-to-face (direct) contact with the end
consumer. For example, cosmetics, jewellery, home appliances,
educational materials, nutritional products, etc. This type of retailing
follows the party plan or the multilevel network. They display and
demonstrate on inviting to a party or customers act like master
distributors appointing their customers on commission basis.
Direct response marketing
• The customer becomes aware of the products/services offered
through non-personal media such as mail, catalogues, phones;
television or the Internet is called direct response marketing. It
includes various forms of communication with the consumers like:
• (a) Mail order retailing: In retailing customer database is used to
develop target catalogues to customers.
• (b) Television shopping: In this kind of retailing, the product is
promoted on television with the product features, price, and
guarantee or warranty.
• (c) E-shopping : This format allows the customer to evaluate and
purchase comfortably from his/her home through the websites using
the Internet. The products are delivered after online payment.
• (d) Telemarketing: Telemarketing is the communication with
customers through telephone, to promote products or services. The
company executive contacts customers at a time that is convenient to
them. Most companies give their tollfree numbers for customers to
contact them. For example, banks selling credit cards, educational
institutions seeking admissions.
Advertising in retailing :
Unit 2
Store Planning:
• Store planning is as important as planning one’s own home. The
owner must detail out every minute details of how space is to be
allocated in different rooms of the house to different items and
materials. The space should be used in such a way that should provide
an overall appearance of organisation, clarity and harmony of
different materials and utilities with the available space and the
people living within it.
• Signs and graphics; play very important role in guiding the customers
through different sections and departments. This facilitates the
customer’s movement from one section department to other. The
signs act as direction and leads for effective shopping.
• Retailer also needs to plan for visual displays that can break the
monotony of movement amongst racks and fixtures. Visual displays
gives ideas to customers on how combination of certain merchandise
gives effective look or use? What are the merchandise opportunities
available in the store?
• Floor plan is an important part of the store planning exercise. It
specifies location of different departments or sections in the store
and how customers are expected to move through these sections and
departments, location of customer service sections and the space
allocated to different sections and departments. While developing
floor plan the retailer does take into account the needs of the
targeted customer group. The retailers plan the allocation of space to
different product categories and groups accordingly
STORE DESIGN
• Store design is an important element as it helps in creating a
distinctive and memorable store image. It includes both the exterior
and interior of the store. The exterior includes the store signage, store
front, and entrance to the store. These are the first visible Images that
will help in enticing the passing shoppers and inducing them to enter
the store. Thus, these factors are critically important in a store design.
The interior of the store design will include store wall, ceiling and
flooring along with the surface finishing on these structural elements.
Storefront Design
• The store front is the important element in enticing passer-by’s
attention. It must be so impressive as to be noticeable by every
passing shoppers whether in the mall or on the shopping street, and
even by passing motorists. A look at the store front should provide to
the passing shoppers the idea about the name of the store, the kind
of merchandise being sold inside the store, and the target consumers
for the said store. Generally the store front will include the overall
structure or architecture of the storefront, the exterior front signage
or board, display windows, if any, and the entrance.
Interior Design
• Interiors of a store is the most important element from the point of
influencing customers in spending more time within the store. Hence,
every aspect of interior needs to be designed in a manner that will
make the customer feel not only comfortable once within the store
but also appeal to his sensory tastes. This will make him/her to spend
time in understanding more about the product range on display.
• The interior designing constitute many elements that help in creating
the desired ambience within the store. The interior designing can be
broken into two types of elements:
Lighting Design
• Lighting is one of the most exciting features in store designing. In
earlier times fluorescent lightings were preferred for overall lighting
effects and incandescent lighting for highlighting the products. In fact
it was a rule in many of the apparel stores which is seen even today in
normal middle class targeting apparel stores to use fluorescent tube-
lights fixtures for creating a bright environment in the store. This gives
the impression of day-light clarity to shoppers. The lighting designer
presently has many different options to choose from.
• Sounds and Smells
• Effective store design is the one that appeals to sight, sound, smell
and touch. Research has shown that besides sight, sound and smell
too have greater effect on the shopper’s senses. Smell is believed to
be most closely linked to memory and emotions. Hence, retailers use
it to draw the customers into the right ‘mood’. For example in a Walt-
Disney company in US uses the smell of fresh baked cookies to relax
customers and provide a feeling of warmth to them.
Store Layout
• There are four basic types of layout – the free flow, grid, loop, and
spine.

• Free flow: This is a very common type of layout used by small stores
which sell a single product category like ladies wear or men’s wear or
kids wear or furniture or purses etc. In this kind of layout the fixtures
and merchandise are grouped into free-flowing patterns. Since, it being
a single product category store, the customers are encouraged to move
freely from one part of the store to another browsing through different
merchandise and trying to spend time in understanding the product
details.
• Grid: This type of layout is common in supermarkets, drug stores and
convenience stores. In this layout the fixtures and counters are laid in
long rows. Customers move through one row of fixtures and counters
and enter into another row of counters/fixtures from the adjacent
point. The customer is expected to move in one direction, when
moving between the rows of counters/fixtures and understandably
not to turn back. There are other customers either moving downward
from the opposite point or queuing behind for moving upward in the
front direction. Thus, customers enter from one point and move out
from the opposite point and enter into the next row of merchandise
from the adjacent entry point.
• Loop: This type of layout is very popular among the departmental stores. It
is also called race track as it circles or cover the whole store’s perimeter.
The loop layout is considered a very effective layout for increasing the
productivity of the space. It starts from the front door or entrance of the
store – which is the main aisle then loops through the entire internal
perimeter of the store – which is either in the form of a circle or rectangle
or square – and then ends at the front of the store (that is the exit door
next to the entrance door). The important benefit of this layout system is
that it exposes the customers to the largest possible amount of
merchandise. The fatigue level for customers while moving through the
main aisle is low as the customers are exposed to different types of
products and categories with innovative visual displays
• Spine: The spine layout tries to combine the advantages of the free
flow layout, the grid layout and the loop layout in a certain way. In
this layout there is a single aisle which takes the customers from the
main entrance to the back of the store and the same aisle is used to
bring back customers to the front.
• On the left and right side of the main aisle there are other
departments and sections that branch off toward the back side or side
walls. And, within each of these departments the merchandise is laid
out in the free flow or grid or loop layout depending upon the type of
merchandise and the fixtures used.
Retail Location Planning
• Location refers to the general position of a shop — a city district, a
neighborhood area, along a major road or secondary Street, or a
shopping mall. Site refers to a shop’s specific spot. Choosing a shop
location is a strategic exercise because it is a decision which has long-
term implications on the retailer’s image, positioning, sales and cost.
Importance of location for a retailer
• Proximity with the customer
• Store visibility
• Store location positioning
• cost
Criteria to assess location for a retail store
• Population size or catchment
• Profile of customers
• Demographic profile
• Competition
• Transportation access and traffic movements
• Parking availability
• Nature of nearby stores or malls
• Accessibility to facilities
Location strategy
• Stand-alone v/s malls
• Leasing options
• Ownership/lease
Retail Image Mix
Retail Space Management
• Space management is a process of utilizing store space to attract more
and more customers and providing them a pleasing shopping
experience because you cannot deny that only a happy customer can
bring more sales.
Importance of Retail space management
• Retail space management is important to increase sales
• Customers can easily find the products they need
• It is helpful in controlling the rush in the peak hours
• Types of Merchandise Which Occupies Retail Space
Types of Merchandise Which Occupies Retail
Space
• 1) Staple or Basic merchandise
• 2) Impulse Products
• 3) Category Products
• 4) Specialty Products
Effective management of retail space requires
you to consider the following points
• #1 life of products on the shelf
• #2 Categories of products:
• #3 Adjacent Products:
• #4 size, shape, and weight of products:
• #5 Frequency of purchase:
Retail Floor Space
Here are the steps to take into consideration for using floor space
effectively −
• Measure the total area of space available.
• Divide this area into selling and non-selling areas such as aisle,
storage, promotional displays, customer support cell, (trial rooms in
case of clothing retail) and billing counters.
• Create a Planogram, a pictorial diagram that depicts how and where
to place specific retail products on shelves or displays in order to
increase customer purchases.
• Allocate the selling space to each product category. Determine the
amount of space for a particular category by considering historical and
forecasted sales data. Determine the space for billing counter by
referring historical customer volume data. In case of clothing retail,
allocate a separate space for trial rooms that is near the product display
but away from the billing area.
• Determine the location of the product categories within the space. This
helps the customers to locate the required product easily.
• Decide product adjacencies logically. This facilitates multiple product
purchase. For example, pasta sauces and spices are kept near raw pasta
packets.
• Make use of irregular shaped corner space wisely. Some products
such as domestic cleaning devices or garden furniture can stand in a
corner.
• Allocate space for promotional displays and schemes facing towards
road to notify and attract the customers. Use glass walls or doors
wisely for promotion.
Retail Marketing
Definition of Retail Marketing
• Retail is the sale of goods and services from businesses to an
end user (called a customer). Retail marketing is the process
by which retailers promote awareness and interest of their
goods and services in an effort to generate sales from their
consumers. There are many different approaches and
strategies retailers can use to market their goods and
services
Retail Marketing Mix: The Four Ps of Retail Marketing
• Retailers use various advertising and communication tools to
grow awareness and considerations with future customers.
Finding the right marketing mix can lead to a profitable
growth and a higher return on investment. By considering
the right advertising strategy retailers can persuade
consumers to choose to do business with their retail brand.
The fundamental approach used my modern retailers in
marketing their products is the Four Ps of Retail Marketing.
• Product: There are two primary types of merchandise. Hard
or durable goods like appliances, electronics, and sporting
equipment. And soft goods like clothing, household items,
cosmetics, and paper products. Some retailers carry a range
of hard and soft items like a supermarket or a major retail
chain while many smaller retailers only carry one category of
goods, like a boutique clothing store.
• Price: Pricing is a key element to any retail strategy. The retail price needs to
cover the cost of goods as well as additional overhead costs. There are four
primary pricing strategies used by retailers:
1.Everyday low pricing: The retailer operates in thin margins and attracts
customers interested in the lowest possible price. This strategy is used by big
box retailers like Wal-Mart and Target.
2.High/low pricing: The retailer starts with a high price and later reduces the price
when the item’s popularity fades. This strategy is mainly used by small to mid-
sized retailers.
3.Competitive pricing: The retailer bases the price on what their competition is
charging. This strategy is often used after the retailer has exhausted the higher
pricing strategy (high/low pricing).
4.Psychological pricing: The retailer sets the price of items with odd numbers that
consumers perceive as being lower than they actually are. For example, a list
price of $1.95 is associated with spending $1 rather than $2 in the customers
mind. This strategy is also called pricing ending or charm pricing.
• Place: The place is where the retailer conducts business with
its customers. The place can be a physical retail location or a
non-physical space like a catalog company or an e-store.
• Promotion: Promotion is the final marketing mix elements.
Promotions include personal selling, advertising, sales
promotion, direct marketing, and publicity. A promotional mix
specifies how much attention to pay to each tactic, and how
much money to budget for each. A promotion can have a wide
range of objectives, including increasing sales, new product
acceptance, creation of brand equity, positioning, competitive
retaliations, or the creation of a corporate image.
The Four Ps Revisited: Customer-Oriented Retail
Marketing
• In recent years, to address the need of taking a more
customer-oriented approach to marketing, the 4 Ps of Retail
Marketing have been revised and replaced by the 4 Cs:
Consumer, Cost, Communication, and Convenience.
• Consumer (versus Product): Instead of focusing on the product the retailer
wants to sell, a smart retailer studies the wants and needs of its consumers
before going to market. The more clearly a retailer understand the wants and
needs of its customer base, the greater chance it will have of attracting
customers and increasing sales.
• Cost (versus Price): In retail a cost is the value of money that has been used up
to produce something. Factors that influence cost include the customer’s cost
to change to a new product and the customer’s cost for not selecting a
competitors product
• Convenience (versus Place): The Internet has made Place less of a factor in
consumer purchasing decisions. Convenience addresses the ease of
completing a transaction including the ease of finding information about a
product, finding the right product, and purchasing a product.
• Communication (versus Promotion): Communications including a range of
efforts including advertising, public relations, grassroots efforts, social media,
and any other form of communication between the company and the
consumer.
Advertising in retail
Advertising mix of the retail store consists of:
• Point of Sale (POS) Advertising
• Sales promotion
• Publicity
• Personal Selling
• POS advertising:
• It consist of displays, visual merchandisings, display contests, shelf-on-hire for
brands.
• They are cost effective and addresses the right target customers as they come
into the store themselves.
• Sales promotion
• sales promotion signifies all those activities that supplement, co-ordinate and
make the efforts of personal selling and advertising more effective. It is non
recurrent in nature which means it can’t be used continuously.
• Sales promotion consists of diverse collection of incentive tools, mostly short-
term designed to stimulate quicker and / or greater purchase of a particular
product by consumers or the trade. Where as advertising offers a reason to
buy, sales promotion offers an incentive to buy. Sales promotion includes
tools for consumer promotion
• Publicity:
• Is the non-paid advertising mileage that the retail organisation gets thr0ugh
free write-ups in media about the store’s latest arrivals, sales promotions or
any event that the store or brand has organized to active the sales objectives
• Personal selling:
• Sales and service personnel in the retail organisation are its ambassadors and
communicate the value proposition of the entire store. Well trained sales and
service associates who advertise the store by their extraordinary selling and
service skills are assets to the retail outlet
CRM in retail
• What is a Retail CRM?
• A CRM, or customer relationship management system, is a software
system that organizes all your business’s customers and leads so that
you can easily stay in touch with them in a trackable way. A good
CRM tool is critical to any business, but most CRM software is geared
toward a business-to-business (B2B) model, which revolves around a
long-format sales cycle that typically requires a deal pipeline.
• A retail CRM, on the other hand, is optimized to help support the
high frequency, repeat purchasing of a business-to-consumer (B2C)
model. Good retail CRM software will provide insights on when it’s
best to reach out to a specific customer again and what the customer is
likely looking for.
Retail CRM Benefits
1. For Clienteling: clienteling refers to the process of efficiently using
customer data in order to create intimate customer relationships.
While clienteling is easy on a small scale with just a handful of
customers, you’ll get dramatically better results if you’re using a
CRM to build these kinds of relationships because you’ll be able to
target a wider audience without sacrificing personalization.
• For Loyalty
• While new customers are always the goal, customer loyalty should
also be celebrated. In fact, a retail CRM can serve you best once
you’ve acquired a customer and are ready to focus on cultivating
loyalty. A CRM should be your go-to resource for understanding what
sort of incentives and rewards your customers are most likely to
respond to, and can help you keep track of what their response has
been to your various offers and services. As you develop your
retention strategy, you should also be able to count on your CRM to
actually segment your customers to determine who is eligible for your
various perks, tiers, and prizes that make up your loyalty program.
• For Personalization
• Which brings us to a third benefit of a CRM—personalization. Emails
with personalized subject lines are 26% more likely to get opened, and
the more targeted you are with your audience, the higher your
conversion rate on messages will be.
• A CRM can help you achieve both those things. The more data you’re
tracking in your CRM, the more you’ll be able to segment and
personalize your audience to ensure that the content of your message
feels ultra-relevant to the final group of recipients.
• For Performance Tracking
• Especially for big organizations, CRMs are particularly helpful for management
teams who want to stay on top of how each salesperson is contributing. With
most CRMs, users are able to “claim” a customer or a deal, and this aspect is no
different for retail.
• Encouraging your salespeople to be accountable for customers’ spending
behaviors will motivate them to be even more thoughtful and strategic about
their work and the way they reach out. A CRM will also therefore be able to
report back how each salesperson has impacted your bottom line, whether
that’s on a per-transaction basis or across their customers.
• For Customer Support
• It goes without saying that a retail CRM can help you better serve and
support your customers, both new and returning. Oftentimes there can be
a disconnect between what your digital team knows and what your retail
team knows about a customer - that’s where having an omnichannel
CRM can truly make a difference. The more your whole team can be on
the same page about a customer’s various interactions, the happier she
will be when she needs support and doesn’t have to start from scratch
with someone who knows nothing about her past. Leveraging a CRM as
a way to document a customer’s preferences will result in service a
customer will remember and cherish. isn’t starting from scratch.
How to Use a Retail CRM
• Update Customer Data
• The first step in a salesperson's process is determining who to contact
and why. The more data they have access to in order to make this
decision, the better. A CRM should ideally get you started by helping
you with contact management in a way that's automated, such as by
integrating with your e-commerce or POS systems like Endear does.
• Having these sources populate your CRM in real-time will take
unnecessary work off your team’s plate and also ensure that no
opportunity falls through the cracks. Your team should also be able to
enhance these records with their own intel that they may have gathered
through an in-person meeting or a phone call.
• Message Your Customers
• A CRM should also provide you with insights about your outreach that
most standard communication channels won’t, such as which recipients
are opening and interacting with your messages. You can then use this
data to better understand who you ought to follow up with, and ensure
you’re not letting important customers get away. Most CRMs will also
provide you with various channels (such as email, text, or social media)
from one centralized platform, which again reduces friction as you go
about your day.
• Manage Assets
• A big part of any sales organization is the collateral you put together to
support your sales process. For B2B businesses, that might be a deck or
one-page overview of your product. For retail, that might be a digital
invite to an event or a lookbook of recommendations to help customers
determine what they want to buy next.
• It’s important that your entire sales team have easy access to these
resources, and that these resources are easy to upload, share, and
leverage as part of outreach. If your CRM can automate the import of
key assets such as your product inventory, your team will be in even
better shape.
• Collaborate with Your Team
• Especially when it comes to outreach, it’s important that everyone on
your sales team is aware of what everyone is working on and no one is
stepping on anyone else’s toes. The last thing you want is for a
customer to receive the same message from multiple people at your
company.
• That’s why it’s important for your CRM to keep track of everyone’s
activity and enable users to communicate with one another.
• Optimize Your Strategy
• The entire purpose of being able to track every detail in your CRM is
to use that customer information to figure out how you and your team
can improve. With your CRM features, you should be able to answer
questions like, “Which kinds of customers respond best to my texts?”
or “Which products is this audience most interested in?” While a CRM
can help you answer those questions, it’s still on you to dedicate the
time to asking them. In this area in particular, your CRM should serve
as an extra set of hands on your team, helping you to determine how
you can continue to improve performance across the board.
UNIT -3
Retail Merchandising

• Retail merchandising includes activities and strategies such as in-store

design, the selection of specific merchandise to match a target
market, and the physical and digital marketing of merchandise to
customers.
• As a form of marketing, promotional merchandising includes
programs such as attractive promotional displays featuring
recognizable adult celebrities or licensing agreements between
retailers and entertainment companies that utilize identifiable
animated children’s movie characters.
• Merchandise planning is the process of forecasting sales and
managing inventories to achieve the objective of understanding and
serving the merchandise needs of customer on time.
• The Key aspects of merchandise planning process are:
• Grading: it involves the planning of merchandise in the retail scenario where
the organization has a large no. of stores. By way of price points and styles.
• Master planning: it defines the boundaries and scale of merchandising in tune
with the strategic objectives.
• Inventory planning
• Range and assortment planning
Buying function
• It plays significant role to survive in a competing situation. In case of a
retailer, the main function of the Buying Department is to obtain the
best value for the money spent on purchase of the required
merchandise. The retailer’s buying department has to ensure that the
material procured is as per the requirement and more particularly in
tune with its strategic needs for a given product or category. While
performing its buying function, the Buying department has to balance
all the factors like material quality, cost of material, sources of supply,
supplier’s strengths and weaknesses, and customers expectations vis-
à-vis product price.
The role of buying function include:
• To understand the consumer segment for whom the merchandise is being
created, in all its aspect;
• To identify the products or merchandise that will best suit the taste and
requirement of the selected consumer segment;
• To evaluate the selected merchandise for its quality specifications that will
best fit into the cost factor. This will give utmost satisfaction to the selected
consumer segment;
• To work out an assortment of different product types that will make a
complete basket of offering to the selected consumer segment;
• To identify the best suited vendors and suppliers, through the process of
extensive search and interaction at various levels. They will be able to supply
the said products or merchandise;
• To negotiate with the select suppliers and vendors for favorable terms of
supplies, so as to attain the best pricing for its consumer segment. This will
help to achieve profitable working for the company.
According to Hirschman and Stampfl, a retail buyer has to perform three major
functions:
i) As a Change Agent: The buyer influences the buying behaviour of consumers
by offering them new range of products and services. The products or services
may be either as a totally new experience or with new ingredients or attributes.
ii) As a Gatekeeper: The buyer is responsible for ensuring right quality of
products from suppliers to the final end consumers.
iii) Opinion Leader: The buyer plays the role of an opinion leader, in conjunction
with its role as a change agent, by influencing consumer opinion through
various means and medium.
shrinkage in Retail merchandise management
• Even with the most sophisticated inventory-management software, it's
important to physically count your on-hand inventory periodically.
Some percentage of your inventory – hopefully, a small percentage –
will always be unaccounted for, which in retail terms is called
shrinkage. Keeping tabs on your shrinkage is important, not just for
accounting purposes but because it can be a sign you have problems in
your store.
• Sources of Shrinkage
• Shoplifting
• Employee Theft
• Preventing Administrative Losses
• Preventing Vendor-Side Losses
Merchandise Pricing
• The price at which the product is sold to the end customer is
called the retail price of the product.
Demand-Oriented Pricing Strategy
The price charged is high if there is high demand for the product and low if the demand
is low. The methods employed while pricing the product on the basis of demand are −
• Price Skimming − Initially the product is charged at a high price that the customer is
willing to pay and then it decreases gradually with time.
• Odd Even Pricing − The customers perceive prices like 99.99, 11.49 to be cheaper
than 100.
• Penetration Pricing − Price is reduced to compete with other similar products to
allow more customer penetration.
• Prestige Pricing − Pricing is done to convey quality of the product.
• Price Bundling − The offer of additional product or service is combined with the
main product, together with special price.
Cost-Oriented Pricing Strategy
• A method of determining prices that takes a retail company’s
profit objectives and production costs into account. These
methods include the following −
• Cost plus Pricing − The company sets prices little above the
manufacturing cost. For example, if the cost of a product is Rs.
600 per unit and the marketer expects 10 per cent profit, then the
selling price is set to Rs. 660.
• Mark-up Pricing − The mark-ups are calculated as a percentage
of the selling price and not as a percentage of the cost price.
• Break-even Pricing − The retail company determines the level
of sales needed to cover all the relevant fixed and variable
costs. They break-even when there is neither profit nor loss.
• For example, Fixed cost = Rs. 2, 00,000, Variable cost per unit
= Rs. 15, and Selling price = Rs. 20.
• In this case, the company needs to sell (2,00, 000 / (20-15)) =
40,000 units to break even the fixed cost. Hence, the company
may plan to sell at least 40,000 units to be profitable. If it is not
possible, then it has to increase the selling price.
• Target Return Pricing − The retail company sets prices in
order to achieve a particular Return On Investment (ROI).
• This can be calculated using the following formula −
• Target return price = Total costs + (Desired % ROI investment)/Total
sales in units
• For example, Total investment = Rs. 10,000,
• Desired ROI = 20 per cent,
• Total cost = Rs.5000, and
• Total expected sales = 1,000 units
• Then the target return price will be Rs. 7 per unit as shown
below −
• Target Return Price = (5000 + (20% * 10,000))/ 1000 = Rs. 7
• This method ensures that the price exceeds all costs and
contributes to profit.
• Early Cash Recovery Pricing − When market forecasts depict
short life, it is essential for the price sensitive product segments
such as fashion and technology to recover the investment.
Sometimes the company anticipates the entry of a larger
company in the market. In these cases, the companies price
their products to shorten the risks and maximize short-term
profit.
Competition-Oriented Pricing Strategy
• When a retail company sets the prices for its product depending
on how much the competitor is charging for a similar product, it
is competition-oriented pricing.
• Competitor’s Parity − The retail company may set the price as
close as the giant competitor in the market.
• Discount Pricing − A product is priced at low cost if it is lacking
some feature than the competitor’s product.
Differential Pricing Strategy
• The company may charge different prices for the same product or service.
• Customer Segment Pricing − The price is charged differently for
customers from different customer segments. For example, customers who
purchase online may be charged less as the cost of service is low for the
segment of online customers.
• Time Pricing − The retailer charges price depending upon time, season,
occasions, etc. For example, many resorts charge more for their vacation
packages depending on the time of year.
• Location Pricing − The retailer charges the price depending on where the
customer is located. For example, front-row seats of a drama theater are
charged high price than rear-row seats.
Pricing Objectives
• 1. Profits-related Objectives:
• i. Maximum Current Profit
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